The spinning top indicates indecision about the future price movement. This is because the buyers and sellers both push the prices on their sides. It helps to gain information about the present situation of the market. This information helps traders to take a position in the present market. 

 In This Article

What is Spinning Top?  

How to analyse a chart using Spinning Top?

Category – Trend

Type – Leading

What is Spinning Top?

The spinning top candlestick chart pattern is a formation that takes place when buyers and sellers balance out each other which leads to similar opening and closing levels. This candlestick pattern is known as a continuation pattern because of the small change it makes in the market direction. 

This chart pattern consists of two variations i.e bullish spinning top which is green in color and a bearish spinning top which is red in color. The bullish formation takes place when the closing price is higher than the opening price. At the same time, the bearish formation takes place when the opening price is higher than the closing price. 

Image Source:-  https://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/content-2-chart-images/spinning_top.png

How to analyse a chart using Spinning Top?

The trading through the spinning top pattern is quite similar to other candlestick formations. Let’s understand this by following two examples:- 

Below is given GBP/USD daily chart:- 

Image Source:- https://www.thinkmarkets.com/getmedia/07d7f070-550a-4f46-bfd8-713a4e59f2b7/spinning_pattern_3.png.aspx

The price action here moves high and creates a new short-term high. But bulls are unable to force a high close so the price gets closed near the opening price. 

The spinning top pattern indicates the end of a strong upside move. At this point, you can either wait for the confirmation candle or try to open a trade immediately after the spinning top formation is created. The stop loss shall be placed above the previous high. 

You can observe a similar situation in the USA/CAD daily chart below:- 

Image Source:-  https://www.thinkmarkets.com/getmedia/6f10cab5-1784-4ddb-985a-ba5554b7d2ca/spinning_pattern_4.jpg.aspx

An impulsive bullish move is observed before the consolidation takes place at the end of an uptrend which includes a spinning top candle that has a top which is a marginally new high. 

The investors realize that bulls are losing momentum. This is because of the hesitation at the top to move forward in the same direction. Due to this, a sharp move starts towards the downside and as a result, the bulls lose their entire gains. 

Either you can open the trade immediately after the formation of the spinning top pattern. Or you can wait for the next candle and receive further confirmation of an impending reversal.